A general definition of value addition is to economically add value to a product by changing its current place, time and form characteristics to characteristics more preferred in the marketplace. When referring to value addition of agricultural activities a simple definition would be to add economic value to an agricultural product (i.e. wheat) by processing it into a product (i.e. flour) desired by customers (i.e.bakers). [1] Furthermore value addition of agriculture can be characterised by farmers changing their position on the supply chain, creating closer or direct linkages between themselves and the consumers or changing the production process to alter or preserve certain characteristics of their products.[2]
Connection to food
Conventional agriculture is no longer seen as a suited way of feeding humans and preserving ecosystems, instead sustainable agriculture is seen to be the new way to do this.[3] At the same time it is central to reach economic profitability, environmental safety and social fairness, and farming systems using fewer inputs and resources without drastically reducing yields.[4] Value addition of agricultural activities is a a part of sustainable agricultural practices. For example in densely populated countries in Asia and Africa, sustainable agricultural practices are those which, among other things, increase household income through value addition of farm produce.[5]
Traditionally value addition of agriculture is associated with the processing of raw products[6] as can bee seen in the definition. Value addition is achieved by removing non-value added aspects, such as waste. Today value addition options for farmers have somewhat expanded to include added value through the agricultural products' identity characteristics, and might involve traits that cannot physically be seen, including local designations.[7] For example local foods are today a popular component of value addition of agriculture.[8]So in a way value addition of agriculture is achieved when farmers are able to supply the market with products with added characteristics and functions, for which consumers are willing to pay a price that are more than the price that the commodities have without these characteristics.[9]The value addition can be extremely important for farmers because they can by this increase their revenues. Furthermore value addition can be created by farmers participating in stages beyond production in the agricultural supply chain, such as product transformation and distribution. In a way these farmers transforms their role of raw commodity producers to agribusiness owners with expanded capabilities.[10] Lastly the overall goal of engaging in value addition is to improve profitability or reduce risk for the overall farm.[11]
In the video below a farmer gives his view on what is value-added and non-value added activities for him in his practise of lean farming. He especially talks about waste (3:00) as a non-value adding activity and how to remove this.
Critique
A slight critique of the concept is that different commodities differ significantly in the level of value-added processing. For example milk from dairies requires much more processing when transformed into i.e cheese products available in food stores, than grass seed crops that come out of the field almost ready for market distribution.[12] When then measuring the extent of which value-added agriculture has a positive effect on the agricultural commodities vary a lot depending industry and country. So one activity which might be a suitable means to add-value to one commodity might not be suitable for another commodity. This is merely to be kept in mind when reading numbers on how a commodity has increased in value after value-adding processing.
Links to SDGs
Value addition agriculture is directly linked to SDG 2 Zero Hunger. Value addition is specifically mentioned in the targets of this goal. The goal is to by 2030 double the agricultural productivity and income of small-scale food producers, especially women, indigenous people and family farmers. This through opportunities for value addition.[13] In a sense value addition of agriculture can also be linked to SDG 8 Decent Work and Economic Growth, SDG 10 Reduced Inequalities. This because value addition of agricultural activities is an opportunity for small producers to change their location on the supply chain and by this giving them economic growth, and especially in poorer countries where this can reduce inequalities.
Organizational illustrations
Kimaye - the divine fruit is an innovation by INI Farms, established in 2009. They are changing the horticulture value chain in India, by creating a model that benefits all the entities involved in the supply chain by removing non-value addition things and incorporating new technologies. More specific the idea developed is a model o contract farming where the company, farmers and society jointly invest in the development of orchards with technology and inputs provided by the company. The profits are shared by all the three participating entities, by the company receiving profits from a lease system of the land, and the profits of the product are split between the owner and farmer. So by removing all the intermediaries, which eats about 30% of the price paid by customers, they've been able to add profits to the i.e. farmers. Furthermore they've employed women supervisors. This is an example of how a company have been able to add value to agricultural activities. By removing middle men and improving technology, the economy for farmers is improving because they're dealing directly with the company instead of the middle men. Furthermore the business model effectivates the supply chain of the fruits are employing a fast cold chain; food are exported in cold trucks. The bottom idea of the organization is to create sustainable farming practises for all the entities involved in the horticulture value chain. [14]
Examples from Finland
An example of how value addition of agriculture works in practice is for example local food marketing and distributions. By localising the distribution channels of farm products both farmers and consumers can share the value which otherwise would be captured by wholesalers and retailers.[15] By this farmers gets financially rewarded more directly. In Finland an example could be Reko which localises the distribution channel of farm products and brings the farmer and consumer closer together. REKO operates in a number of cities in Finland and the main goal is to bring producers and consumers together. The food rings operate as closed groups on Facebook and REKO is free for both producers and consumers. Producers get to know the orders in advance, and for consumers REKO is somewhat of an community event. The goal is to ensure a steady supply chain by removing most of the middle men.[16]
^ Coltrain, D., Barton, D., Boland, M. 2010. Value Added: Opportunities and Strategies. Arthur Capper Cooperative Center, Department of Agricultural Economics, Kansas State University.
^ Lu, R., Dudensing, R. 2015. What do we mean by value-added agriculture? Choices, 4th Quarter. Agriculture & Applied Economics Association.
Lichtfouse, E. et al. Agronomy for sustainable agriculture. A review. Agronomy for Sustainable Development, Springer Verlag/EDP Sciences/INRA, 2009, Vol. 29, pp.1-6
^ Lichtfouse, E. et al. Agronomy for sustainable agriculture. A review. Agronomy for Sustainable Development, Springer Verlag/EDP Sciences/INRA, 2009, Vol. 29, pp.1-6
^ R. Lal. Soils and sustainable agriculture. A review. Agronomy for Sustainable Development, Springer Verlag/EDP Sciences/INRA, 2008, 28 (1), pp.57-64.
Coltrain, D., Barton, D., Boland, M. 2010. Value Added: Opportunities and Strategies. Arthur Capper Cooperative Center, Department of Agricultural Economics, Kansas State University.
Ernst, M., Woods, T. 2011. “Adding Value to Plant Production-An Overview.” Cooperative Extension Service, College of Agriculture, University of Kentucky.
^ Woods, T., M. Velandia, R. Holcomb, R. Dunning, and E. Bendfeldt. 2013. “Local Food Systems Markets and Supply Chains.” Choices. Quarter 4.
Value addition of agricultural activities
Definition
A general definition of value addition is to economically add value to a product by changing its current place, time and form characteristics to characteristics more preferred in the marketplace. When referring to value addition of agricultural activities a simple definition would be to add economic value to an agricultural product (i.e. wheat) by processing it into a product (i.e. flour) desired by customers (i.e.bakers). [1] Furthermore value addition of agriculture can be characterised by farmers changing their position on the supply chain, creating closer or direct linkages between themselves and the consumers or changing the production process to alter or preserve certain characteristics of their products.[2]
Connection to food
Conventional agriculture is no longer seen as a suited way of feeding humans and preserving ecosystems, instead sustainable agriculture is seen to be the new way to do this.[3] At the same time it is central to reach economic profitability, environmental safety and social fairness, and farming systems using fewer inputs and resources without drastically reducing yields.[4] Value addition of agricultural activities is a a part of sustainable agricultural practices. For example in densely populated countries in Asia and Africa, sustainable agricultural practices are those which, among other things, increase household income through value addition of farm produce.[5]
Traditionally value addition of agriculture is associated with the processing of raw products[6] as can bee seen in the definition. Value addition is achieved by removing non-value added aspects, such as waste. Today value addition options for farmers have somewhat expanded to include added value through the agricultural products' identity characteristics, and might involve traits that cannot physically be seen, including local designations.[7] For example local foods are today a popular component of value addition of agriculture.[8] So in a way value addition of agriculture is achieved when farmers are able to supply the market with products with added characteristics and functions, for which consumers are willing to pay a price that are more than the price that the commodities have without these characteristics.[9] The value addition can be extremely important for farmers because they can by this increase their revenues. Furthermore value addition can be created by farmers participating in stages beyond production in the agricultural supply chain, such as product transformation and distribution. In a way these farmers transforms their role of raw commodity producers to agribusiness owners with expanded capabilities.[10] Lastly the overall goal of engaging in value addition is to improve profitability or reduce risk for the overall farm.[11]
In the video below a farmer gives his view on what is value-added and non-value added activities for him in his practise of lean farming. He especially talks about waste (3:00) as a non-value adding activity and how to remove this.
Critique
A slight critique of the concept is that different commodities differ significantly in the level of value-added processing. For example milk from dairies requires much more processing when transformed into i.e cheese products available in food stores, than grass seed crops that come out of the field almost ready for market distribution.[12] When then measuring the extent of which value-added agriculture has a positive effect on the agricultural commodities vary a lot depending industry and country. So one activity which might be a suitable means to add-value to one commodity might not be suitable for another commodity. This is merely to be kept in mind when reading numbers on how a commodity has increased in value after value-adding processing.Links to SDGs
Value addition agriculture is directly linked to SDG 2 Zero Hunger. Value addition is specifically mentioned in the targets of this goal. The goal is to by 2030 double the agricultural productivity and income of small-scale food producers, especially women, indigenous people and family farmers. This through opportunities for value addition.[13] In a sense value addition of agriculture can also be linked to SDG 8 Decent Work and Economic Growth, SDG 10 Reduced Inequalities. This because value addition of agricultural activities is an opportunity for small producers to change their location on the supply chain and by this giving them economic growth, and especially in poorer countries where this can reduce inequalities.Organizational illustrations
Kimaye - the divine fruit is an innovation by INI Farms, established in 2009. They are changing the horticulture value chain in India, by creating a model that benefits all the entities involved in the supply chain by removing non-value addition things and incorporating new technologies. More specific the idea developed is a model o contract farming where the company, farmers and society jointly invest in the development of orchards with technology and inputs provided by the company. The profits are shared by all the three participating entities, by the company receiving profits from a lease system of the land, and the profits of the product are split between the owner and farmer. So by removing all the intermediaries, which eats about 30% of the price paid by customers, they've been able to add profits to the i.e. farmers. Furthermore they've employed women supervisors.This is an example of how a company have been able to add value to agricultural activities. By removing middle men and improving technology, the economy for farmers is improving because they're dealing directly with the company instead of the middle men. Furthermore the business model effectivates the supply chain of the fruits are employing a fast cold chain; food are exported in cold trucks. The bottom idea of the organization is to create sustainable farming practises for all the entities involved in the horticulture value chain. [14]
Examples from Finland
An example of how value addition of agriculture works in practice is for example local food marketing and distributions. By localising the distribution channels of farm products both farmers and consumers can share the value which otherwise would be captured by wholesalers and retailers.[15] By this farmers gets financially rewarded more directly. In Finland an example could be Reko which localises the distribution channel of farm products and brings the farmer and consumer closer together. REKO operates in a number of cities in Finland and the main goal is to bring producers and consumers together. The food rings operate as closed groups on Facebook and REKO is free for both producers and consumers. Producers get to know the orders in advance, and for consumers REKO is somewhat of an community event. The goal is to ensure a steady supply chain by removing most of the middle men.[16]External links
INI FarmsOpen source articles
Lichtfouse (2010). Agronomy for sustainable agriculture. A review.Coltrain (2000). Value Added: Opportunities and Strategies
Lu (2015). What Do We Mean by Value-added Agriculture.
Quiz
Quiz created by Sofia Slotte with GoConqrLichtfouse, E. et al. Agronomy for sustainable agriculture. A review. Agronomy for Sustainable Development, Springer Verlag/EDP Sciences/INRA, 2009, Vol. 29, pp.1-6
Coltrain, D., Barton, D., Boland, M. 2010. Value Added: Opportunities and Strategies. Arthur Capper Cooperative Center, Department of Agricultural Economics, Kansas State University.
Ernst, M., Woods, T. 2011. “Adding Value to Plant Production-An Overview.” Cooperative Extension Service, College of Agriculture, University of Kentucky.
Lu, R., Dudensing, R. 2015. What do we mean by value-added agriculture? Choices, 4th Quarter. Agriculture & Applied Economics Association.
Lu, R., Dudensing, R. 2015. What do we mean by value-added agriculture? Choices, 4th Quarter. Agriculture & Applied Economics Association.
Oregon State University (September 4, 2007). Value added commodities give economic boost. Available at:
http://extension.oregonstate.edu/news/release/2007/09/value-added-commodities-give-economic-boost Retrieved on: 10.5.2017
United Nations Sustainability Goals. Retrieved 27.2.2017
http://www.un.org/sustainabledevelopment/hunger/
AIM2Flourish (16.2.2016). Agricultural Innovation at "KIMAYE - THE DEVINE FRUIT".
http://aim2flourish.com/innovation/view/48/agricultural-innovation-at-kimaye-the-divine-fruit
Lu, R., Dudensing, R. 2015. What do we mean by value-added agriculture? Choices, 4th Quarter. Agriculture & Applied Economics Association.